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FCC Adopts Tough Net Neutrality Rule in Historic Regulatory Shift

The Federal Communications Commission has done what no one, including apparently chairman Tom Wheeler, once thought possible when the debate over net neutrality erupted early last year. The commission today took what was once called "the nuclear option'' by reclassifying broadband Internet service providers (ISPs) as "telecommunication services'' subject to regulation similar to the telephone monopolies of the last century. The reclassification gives the commission far greater authority to prevent the companies that own bandwidth from favoring some content providers.

"The Internet is too important to allow broadband providers to make the rules,'' Wheeler said as the commission voted.

The action places ISPs under Title II of the Telecommunications Act, reversing a 2002 FCC decision that classified ISPs under a different section of the law. The FCC's 2010 net neutrality regulation was struck down in January 2014 by a federal court that generally upheld the intent of the rule to prevent ISPs from creating "fast lanes'' for those who can pay more or restricting bandwidth for some companies. The court ruled the FCC was imposing regulations it didn't have the authority to enforce because it had not classified ISPs as utilities.

Verizon, which brought the suit voiding the previous rule, immediately condemned passage of the new rule. "Today's decision by the FCC to encumber broadband Internet services with badly antiquated regulations is a radical step that presages a time of uncertainty for consumers, innovators and investors,'' said Michael E. Glover, Verizon's senior vice president of public policy and government affairs.

A legal challenge to the rule is widely anticipated.

The new rule, which reportedly is more than 300 pages long, which will take effect once it is published in the Federal Register, blocks so-called "fast lanes,'' known more formally as paid prioritization, will forbid ISPs from blocking or slowing of some content in favor of others and will make clear that all lawful content has equally standing.

Wheeler, in a widely read op-ed earlier this month, called the new rule "the strongest open Internet protections ever proposed by the FCC.'' He rejected arguments by opponents that tougher regulations will discourage investment in expanded access and service improvement. Wheeler claimed that wireless Internet providers operating under similar rules have invested more than $300 billion in infrastructure over the last two decades, "proving that modernized Title II regulation can encourage investment and competition.''

"My proposal assures the rights of Internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission,'' Wheeler wrote.

According to an FCC fact sheet, the new rule will apply fewer Title II sections to ISPs than have applied to mobile carriers for the past 20 years.

Among the many twists and turns in the debate the past year has been the transformation of Wheeler from net neutrality villain to champion. Following the 2014 court ruling, Wheeler proposed a rule that would not reclassify ISPs and opened the door for "fast lanes'' affordable to wealthy, established Internet content providers. That sparked a firestorm of opposition, including by Entrepreneur. Wheeler was famously derided by comedian John Oliver as the regulatory equivalent of hiring a dingo as babysitter.

The debate over the rules has been pointed, including among entrepreneurs. Mark Cuban, star investor on Shark Tank, has said publicly the new rule will "f*** everything up,'' noting that whatever action this group of FCC commissioners has opted not to take could be reversed by a future commission.

Just this week, Will Carty, manager of public policy for Twitter, wrote a blog post praising reclassification as "critical to American economic aspirations and our nation’s global competitiveness'' with "important implications for freedom of expression.''

The net neutrality debate has created an intriguing paradox. Freewheeling Internet companies, thriving with minimal regulation, perceive tough regulation of ISPs as the only guarantee for a future in which new companies have the same opportunity to innovate and challenge dominant players.

A court challenge to the rule by ISPs is anticipated, if only because they have sued before challenging regulations, but the opposition increasingly seems resigned. Cablevision CEO James Dolan said during an earnings call Wednesday “we don’t see at least what the Chairman has been discussing as having any real effect on our business.” Similarly, an effort in Congress to pass legislation that would preempt the new net neutrality rule was abandoned on the eve of the commission meeting adopting the rule.